Benchmark yields stick at 45-year low

Philly-area manufacturing weakness trumps other data

RachelKoning

WASHINGTON (CBS.MW) - Benchmark 10-year yields held at 45-year lows Thursday after a report showing persistent weakness in Philadelphia-area manufacturing trumped earlier signs of recovery in a New York factory index and weekly jobless claims.

In a day flooded with economic data, the inflation-sensitive long bond extended its rally, further flattening the long end of the yield curve as wholesale prices fell and the core PPI saw its biggest monthly drop in nine years.

Bondholders have been hot after longer-maturity debt, still cheaper compared to shorter-maturity issues, and desirable in a low inflation environment. Stock investors clung to a bullish read of the day's mixed batch of data.

The Dow Jones Industrial Average
DJIA, -0.67%
climbed 52 points, or 0.6 percent, to 8,699, after shedding an aggregate 79 points in the previous two sessions.

Factory activity within Pennsylvania, Delaware and New Jersey registered at -4.8 in May. The negative figure shows a contraction in business, although not as severe as the -8.8 April reading. Outlooks among factories in the region did improve.

But the Federal Reserve Bank of New York said its Empire State Manufacturing Survey of business conditions in New York State jumped to 10.6 in May from -20.2 in April, its strongest pace since January.

The New York index is a relatively new barometer but is gaining a wider following. Investors and economists track the other regional factory readings - the Philly index chief among them - because they offer a more up-to-date reading on business health. Read more on the day's manufacturing releases.

Falling prices for energy, clothes, cigarettes and cars were behind a record drop for the producer price index in April, government figures showed Thursday. The core rate fell the most in nearly a decade.

Wholesale prices fell 1.9 percent last month, the Labor Department said Thursday. The previous record was a 1.6 percent drop in October 2001.

Jobless claims, inventories, production

Meanwhile, for just the week ending May 10, first-time requests for jobless benefits fell 13,000 to 417,000, the lowest in more than a month but keeping claims above the key 400,000 mark for 13 years now.

Still, the number of Americans who continue to collect benefits each week remains elevated.

Insured unemployment stood at 3.77 million, up 120,000 and the highest since November 17, 2001.

The four-week average of continuous claims stood at 3.66 million, an increase of 57,000 and the highest since June 2002.

In yet another of the many economic reports out Thursday, output at U.S. factories declined for a third straight month in April, dragging overall industrial production lower.

And, business inventories rose by a larger-than-expected 0.4 percent in March, the Commerce Department reported Thursday.

The Treasury Department said Thursday it would suspend until further notice the details of next Monday's regular 3- and 6-month T-bill auction.

A Treasury spokeswoman had no further comment. The suspended auction comes as Congress continues to debate the administration's request to permanently raise the current $6.4 trillion debt limit.

Treasury has been bumping up against the limit over the past several months and has shifted money from other federal accounts to so far allow for the short-term debt sales it needs to fund government operations. A weak economy has slashed tax revenue at the same time that increased spending on defense and benefits have stretched the nation's finances. See related story.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.